Online Gambling: The WTO Loads Antigua's Slingshot

The WTO ruling that lets Antigua suspend U.S. copyright law has its roots in the birth of online gambling. It quickly became a major part of the Antiguan economy, but dried up after the U.S. pulled the plug on its agreement with the island nation. The WTO ruling gives Antigua a new card to play: the threat of opening the floodgates on U.S. copyrighted content.

By David Vranicar
02/02/13 5:00 AM PT

Earlier this week, the World Trade Organization ruled that the nation of Antigua will be allowed to turn a blind eye to United States intellectual property rights. Put more technically, Antigua now has the right to suspend its obligations to American copyright, trademark and patent holders.

The ruling stems from a decade-old U.S. decision to prohibit remote gaming -- a move that was extra painful to Antigua, where nearly 5 percent of the population was reportedly once employed in the online gambling industry.

This story has gained extra attention because of the rumor that Antigua plans to launch a Web portal designed specifically to distribute -- for free -- U.S.-copyrighted software, movies, music and the like. The U.S. has called the idea "government-sponsored piracy," while a counsel to the International Intellectual Property Alliance said that "state-sanctioned theft is an affront to any society."

So the tiny Caribbean island has ruffled some feathers.

In this TechNewsWorld podcast, Mark Mendel, an attorney for Antigua in the WTO case, joins us to discuss the situation. Mendel explains the importance of online gambling to the Antiguan economy, as well as what the nation plans to do with its WTO victory. He also discusses the piracy story line, and whether we should expect to see some sort of Antiguan-backed Pirate Bay.

TechNewsWorld: It's my understanding that the gambling sector in Antigua had really grown into a huge money-maker. There was a Reuters article that said it employed 4,000 people and was worth more than $3 billion to the nation's economy.

Mark Mendel: That's right, it was just an unbelievable part of the economy. Antigua was lucky, but also smart in being one of the first ones out the gates on this, developing the regulatory system and everything else. It's like anything else -- sometimes the first horse out the gate will get an advantage over the field.

So in this time, in the late 1990s or early 2000s, Antigua was the world leader in remote gaming. There were hundreds of companies there, and 4,000 people is 5 percent of the island's population. It was massive, and it was fantastic for the island. When they were at their height, they had local people as IT technicians, hardware installers, call center workers, accountants, finance managers, general managers -- doing all sorts of things, from the simplest to the most complicated, which was an absolute wonder to the economy.

TNW: At this time, was the U.S. Antigua's biggest "customer" when it comes to online gambling? Did Antigua gambling kind of go as the U.S. went?

Mendel: Yeah, because actually when Internet gambling started developing, there wasn't a market for it in Europe. If you look at the development of the industry in Europe, it lagged way behind America. The Antigua companies focused virtually exclusively on America, not only because they thought they could, but because they're more or less in the same time zone, there's an identification of sports and things like that. So America was the market.

TNW: Antigua, according to the timeline I have here, brought its first case before the WTO in 2003, and then in 2005 Antigua won a WTO ruling that said the United States prohibition of foreign gambling services discriminated against foreign companies. That was, at the time, thought to be a pretty major ruling, right?

Mendel: It was a major ruling. The decision really had three parts. Fundamentally the WTO ruled that, number one, the U.S. had made a commitment to allow unrestricted, not only remote, gaming, but also that foreigners should have the full right to do domestic gaming as well. So the U.S. had made that full commitment. [The second thing was that] by criminalizing, and in essence prohibiting foreign companies from offering these services, the U.S. was in violation of the trade agreement. The third thing was the Americans failed to establish that, despite the first two facts, they were entitled to prohibit it because it was so bad that they had to [block remote gambling] to protect the public health and morals of the country.

TNW: Let's fast forward to this week, and to the decision in Geneva that you referenced earlier. The WTO has reportedly authorized to -- maybe disregard is the wrong word -- but to cast aside U.S. copyrights and intellectual property rights. Tell me if that's being reported correctly, and kind of what it means -- what this decision means and how it will be used as a compensatory device.

Mendel: Well, some are reporting it right and some are reporting it completely wrong and most are reporting it both wrong and right, which is what you would expect, you know?

But let me go back to something else: It's not a compensatory vehicle. That's not what it's supposed to do. What happens in most WTO cases, the losing government usually complies. They either comply or they do something with the other country to make them happy and the dispute goes away. So 90-something percent of these cases are resolved very quickly and amicably. Even though the loser may not like losing, they understand it's a system that benefits everybody and all that kind of stuff.

Now, when you don't comply, the WTO doesn't have an army, it doesn't have an ability to extract taxes or something like that. So, anticipating the odd situation where somebody might not comply, there's a provision in the WTO agreements that allows the victorious country, in our case Antigua, to suspend certain rights that the maleficent party, which would be the United States, has under the WTO agreements -- not to compensate Antigua, but to pressure the American government to conform their laws to the international requirements of the WTO.

TNW:I saw it described as a "bargaining chip." Is that accurate? Can you think of it like that?

Mendel: Well, it's a bargaining chip only in the sense that by suspending these certain other obligations under other agreements or other trade areas, [the WTO] intended to pressure the bad government domestically.

What that means in our case, for example: Antigua negotiates with the United States for years and years and years, the United States doesn't really want to negotiate, they definitely don't want to comply, and they haven't complied. Antigua, after 10 years of negotiating, loses its industry and said, "What in the world can we do?"

Well, what the WTO agreements provide for is -- assuming you prove your entitlement, which we did --[it gives] you the ability to pressure, to punish, a completely innocent sector of the American economy in hopes that that will bring pressure on the government to comply or negotiate property.

So if Antigua doesn't have the clout, maybe the American software industry, for example, or the motion picture industry -- or all of them, intellectual property rights holders -- maybe they will have enough clout or influence on the American government. Let's just take Microsoft, for example. Microsoft says all of a sudden, "Wait, we're about to have the lawful loss of an important intellectual property right just because the American government won't work with Antigua on online gambling?" It wasn't designed to compensate Antigua, it was designed to bring this kind of domestic pressure to bear.

TNW: Now one thing that would seem to turn up this pressure is the idea, however it was started, that Antigua is contemplating setting up a portal, or a website, where people can access and download all sorts of copyrighted material. This obviously would be facilitated, in theory, by the WTO decision that kind of waives the copyrights. It would seem that Antigua could have this, as U.S. regulators have said, kind of a "government-sponsored piracy" website. And it wouldn't even be called piracy, I guess, because there would be no copyright to be pirating.

Is this idea of the website, which has caught a lot of attention -- is that legitimate? How did that start? Is it a threat? We kind of see how the foundation is set for this to happen conceptually. Do you think this will happen, or is it just bloggers running amuck with the story?

Mendel: Well, I think it's important to focus on the rights that we got. And expressed properly, we got the right to suspend our obligations to American copyright trademark patent holders. Our obligation to respect their intellectual property is lawfully suspended. So it's not piracy, it's not theft. It's authorized by international law, though a process the Americans not only endorsed, but designed.

We could have lost and had no remedy whatsoever. A lot press reports we're seeing [say] "Antigua's going to be a pirate haven." And sadly, even the early stories from the U.S. IP people, they were saying, "Antigua is going to be a renegade and we'll have to retaliate against them for violating our rights." We're not violating their rights. The people they should be angry at is their own government that got them in this mess. Because we didn't get them in this mess, the American government did.

As far as the possibilities, there are many and some of them are more obvious than others. At this point in time, we don't want to say what our favorite approach is going to be. We don't want the debate to focus on whether Antigua is going to do this or do that or hurt his person or hurt that person. What we want the focus to be on is that we have this right now; why this right arose; and how it could be remedied before it's acted upon.